How do we know for sure that there’s a recession coming, and why can’t we stop it?
In: Economics
Recessions are natural. We know its coming because they come in a cycle, and its been a while since the last. There are also a number of indicators that suggest a shock will come soon. The difficulty is in predicting the exact time and severity of the recession.
We can’t stop it because recessions are a natural product of our economic system. We rely on unproductive businesses going bust. Stopping recessions would require unproductive businesses to be kept afloat (since we have no effective way of knowing which are productive if we subsidise them) which would slow productivity growth in the long run. The USSR avoided recessions because all firms were state run, but perpetually low productivity growth meant that in the long run it was poorer than market capitalist economies.
What we can do is mitigate recessions, by preventing downward spirals and using various methods to prevent recessions causing poverty, like lowering interest rates or launching public works.
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